BCE Inc., the Canadian telecommunications giant, recently slashed its dividend by 56% in early May 2025. The annual dividend was reduced from $3.99 to $1.75 per share. This move was necessary to strengthen the company’s balance sheet and secure its future.
BCE and its peers have invested billions into upgrading infrastructure and expanding 5G coverage in recent years. These investments have squeezed cash flow, pushing payout ratios over 100%. Despite the dividend cut, analysts estimate that BCE will generate roughly $3.33 billion in free cash flow this year, or about $3.62 per share.
The reduced dividend of $1.75 per share is now more sustainable.
BCE cuts dividend to boost stability
BCE’s capital expenditure requirements are expected to decrease over the next few years, significantly increasing its free cash flow.
The company could resume its annual dividend increases as early as next year. Investors seeking a solid dividend stock with decent yield, capital protection, and long-term growth potential should still consider BCE. However, the Motley Fool Stock Advisor Canada team recently identified their top stocks for 2025 and beyond, and BCE wasn’t one of them.
BCE remains a significant player in the telecom sector. While recent dividend cuts have been necessary, the company is positioned to reinforce its financial stability and potentially return to growth. Investors should weigh the current conditions and future prospects of the telecom industry when making investment decisions.
